Edited version of private advice

Authorisation Number: 1052265688699

Date of advice: 24 June 2024

Ruling

Subject: Early stage investor offset

Question

Will the Commissioner exercise his discretion under subsection 360-30(4) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time to the trustee for Trust A (the Trustee), to provide a written notice of the amount of early stage investor tax offset available to members of Trust A in relation to the Trustee's investment in Company A during the year ended 30 June 20XX?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

XX/XX/XXXX

Relevant facts and circumstances

1.            Trust A is a discretionary investment trust.

2.            On XX/XX/XXX, the Trustee was issued shares in Company A.

3.            Company A recently advised the Trustee that it met the requirements of an early stage innovation company (ESIC) as defined in section 360-40 of the ITAA 1997.

4.            As soon as the Trustee was advised by Company A of this information, the Trustee started taking steps to claim the early stage investor offset.

5.            The Trustee would like an extension to XX/XX/XXXX to provide a written notice to its beneficiaries, as required by subsection 360-30(4), so that the offset can be claimed by the beneficiaries of Trust A.

6.            The Trustee did not make investments into any other company that is an ESIC in the same income year.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 170

Income Tax Assessment Act 1997 section 360-15

Income Tax Assessment Act 1997 subsection 360-30(4)

Income Tax Assessment Act 1997 section 360-40

Reasons for decision

All legislative references are to the ITAA 1997 unless otherwise indicated.

Issue 1

Question 1

Will the Commissioner exercise his discretion under subsection 360-30(4) to allow an extension of time to the trustee for Trust A (the Trustee) to provide a written notice of the amount of early stage investor tax offset available to members of Trust A in relation to the Trustee's investment in Company A during the year ended 30 June 20XX?

Summary

The Trustee is granted addition time to the Trustee to provide the written notice to its members by XX/XX/XXXX.

Detailed reasoning

1.            Subsection 360-40(4) states:

The trustee or partnership must give the *member written notice of the determination. The notice:

(a) must enable the member to work out the amount of the member's *tax offset by including enough information to enable the member to work out the member's share of the notional tax offset; and

(b) must be given to the member within 3 months after the end of the income year, or within such further time as the Commissioner allows

2.            Whilst the Commissioner has not published any view on what factors will be considered in examining a request under this subsection, the reason advised for not providing the notice is considered relevant in determining whether additional time should be granted.

3.            In this case, the Trustee was not advised by Company A that it met the requirements to be an ESIC, as defined in section 360-40, at the end of the relevant income year. The Trustee was only recently advised by Company A that it met the requirements to be an ESIC.

4.            Providing all the conditions within section 360-15 have been met there will be an entitlement to the early stage investor offset.

5.            The written notice as required by subsection 360-40(4) provides the relevant beneficiary the information required to claim their share of this offset when lodging their income tax return for the relevant income year.

6.            As per section 170 of the Income Tax Assessment Act 1936 a beneficiary of a trust estate can amend an income tax assessment within 4 years of the date their assessment is given.

7.            As any assessment issued in respect of the relevant income year would be within this 4 year period it is reasonable to allow the Trustee additional time to provide the written notice. By providing the written notice allows the beneficiary to claim the offset that is available to them under section 360-40.

8.            The Commissioner will allow the Trustee additional time until XX/XX/XXXX, to provide a written notice as described in subsection 360-40(4) to its members.